Amazon-backed food delivery firm Deliveroo is now valued above $7 billion after raising $180 million in fresh capital.
The new round was led by two of Deliveroo’s existing backers, Durable Capital Partners and Fidelity. Both are investors that put money into public as well as private firms.
UK-headquartered Deliveroo, which has experienced a boom in custom amid national lockdowns, also on Sunday confirmed plans for a stock market debut. The company, though run by American CEO Will Shu, is expected to list on London’s Stock Exchange.
Insider reported earlier this week that an IPO could value Deliveroo at £10 billion ($13.6 billion), and that the firm was potentially eyeing an April float.
That Durable Capital and Fidelity are upping their stakes now signals confidence in Deliveroo’s prospective share price and future growth. As one industry source put it: “Why buy in at $13 billion when you can buy in at $7 billion now?”
The gambit has worked before.
Both Durable Capital and Fidelity invested in Deliveroo’s US equivalent, DoorDash, around six months ahead of its December IPO at an approximately $16 billion valuation. On IPO, DoorDash topped a $32 billion valuation and its market cap now hovers around the $60 billion mark.
Deliveroo is based in the UK and competes with the likes of Uber Eats in Europe and parts of Asia. It does not currently operate in the US. It offers food, alcohol, and grocery deliveries on demand via an app and relies on a network of gig-economy cyclists and motorcyclists to ferry items to customers.
It was founded in 2013 by Shu, formerly an investment banker, and Greg Orlowski. Orlowski left in 2016, and Shu remains the CEO of the business.
An IPO would cap a rollercoaster year for the firm.
As is typical for high-growth, venture capital-backed firms, Deliveroo has been mostly loss-making to date. As the UK, its primary market, went into lockdown in the spring and restaurants shuttered, the firm warned it may collapse.
The situation was exacerbated by the UK’s competition regulator denying Deliveroo access to a large tranche of $575 million in funding, led by Amazon in 2019, on competition grounds. Deliveroo laid off about 300 staffers to reduce costs.
The regulator eventually cleared the funding in April, concluding there was no antitrust threat from Amazon’s involvement. Deliveroo’s business also began to improve as restaurants turned to delivery apps for revenue and consumers upped their takeaway orders, bored of home cooking.
Having initially warned of collapse, Deliveroo towards the end of the year said it became “operationally profitable” in 2020.
Its most recent publicly available financials showed increased revenue for 2019 of $1 billion, a gross profit margin of around 24%, and heavier year-on-year pre-tax losses of $393 million.
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